Fairfax County construction projects received a significant boost last week with the sale of $198 million worth of bonds on May 30. The chief benefactor of this sale is the public school system, which received $130 million. The Fairfax County Department of Transportation, the Park Authority, the Fairfax County Public Library and public safety facilities also received significant amounts of money from the sale.
The bonds sold were authorized by referendums on bond sales stretching back to 1989. County financial planners do not sell bonds immediately when they are approved but rather wait for a time when the projects the bond money is earmarked for are low on cash or when interest rates are favorable. That waiting period can sometimes take years.
"Mostly it's when the projects need the cash. The timing isn't so much rate-dependent," said Leonard Wales, assistant budget director for Fairfax County. Although the county follows rates very closely, it will look first at projects’ needs when deciding to sell bonds, said Wales. Bonds could be sold at unfavorable rates when projects are cash-strapped. But "we haven't had that dilemma," added Wales. "Rates have not been bad since the 1980s."
Many counties use bond sales as part of their budgets, said Ralph Tabor, assistant legislative director for the National Association of Counties. But few of them are granted the AAA rating that allows Fairfax County to borrow at attractive rates.
Tabor added, however, that bond ratings do not substantially affect the interest rates. With a lower bond rating, "it's not a large amount extra that you pay," he said.
After bonds are sold, the money has to be spent quickly to minimize the debt service. Federal law requires that it be used within two years.
Projects financed by bond sales are already under way, said Young Ho Chang, director of the Fairfax County Department of Transportation. "What this will do is continue the process of the project," he added. "It's really a cash-flow mechanism. You only sell what you need."
Of the public transportation bond money, almost $14 million will be used for the county's commitment to Metro, and $12.5 million will be spent on road projects.
Among the roads to benefit from that money are Wiehle Avenue, South Van Dorn Street, the Pohick Connector and the Fairfax County Parkway.
"Without [bonds], you wouldn't have anything," said Michael Eckhoff, assistant director of design and construction for the public school system. "All your new school construction, modular additions, regular school additions and renovation are all paid for by bond sales."
"The sale of bonds is vital to our capital projects," agreed Edwin Clay III, director of the Fairfax County Public Library. "That's why you have elections. The county gets permission." The Public Library will receive $3.8 million from the sale. That money will be used to pay off the completed construction of the Great Falls Branch and to buy the land for a new branch in Burke and a new branch in the Kingstowne area. A potential bond referendum in 2004 might give the library an additional $150 million, with which it will build a library in Oakton.
THE DELAY BETWEEN the time bond sales are approved by the voters and the time the bonds are actually sold might raise some questions in citizens' minds, said Supervisor Michael Frey (R-Sully). "Transportation bonds have been authorized by the voters in some cases 14 years ago," he said.
"We told the voters, 'If you approve these bonds, we're going to move quickly to address this problem.' And we didn't," he added. "There are good reasons why it wasn't done, but it raises questions in people's minds."
According to Frey, this issue is particularly pertinent in light of the referendum this November to raise the sales tax to finance bonds that will be used to fund construction projects. "Here is a specific question that I guarantee you will come up," he said. "It's going to be raised in November. There's no question."
Frey cast the only dissenting vote when the board voted 9-1 last month to become the first jurisdiction in Northern Virginia to endorse the sales-tax referendum.
There are currently $730.53 million worth of bonds that have been authorized but that have not been sold. Of that, about $510 million are in school bonds authorized by the 1999 and 2001 referendums.
The county plans to sell those remaining bonds within the next five years.
"The Capital Improvements Program does contain a timetable," said Wales.
County Chief Financial Officer Edward Long said that it is not uncommon for several years to go by between bond referendums and the time when they are actually sold.
"These bonds will be spent," he said, referring to the unsold bonds. "This just gets everything in a queue."
The county tries to tell voters that authorizing bond sales does not mean the bonds will be sold immediately, he added. "If people think that they vote on it on Tuesday and it's going to be done on Wednesday, that's a big misconception," he said.